April 5, 1999
Jonathan G. Katz, Secretary
Securities and Exchange Commission
Mail Stop 6-9
450 Fifth Street, NW
Washington, D.C. 20549
File No. S7-5-99
Re: Proposed Amendments to Rule 15c2-11
Dear Mr. Katz:
I am writing to voice my strong opposition to the proposed amendments to
Rule 15c2-11.
I believe that the SEC is well-intentioned in its efforts to combat
microcap fraud; however, the proposed amendments to Rule 15c2-11 fail to
recognize the devastating impact they will have on investors, small
companies and the reputable and legitimate market makers and brokers who
make a market in these stocks.
Under the proposed amendments, the responsibility of regulating and
policing small company issuers, whether reporting or non-reporting, would
effectively shift from the SEC to the market makers who trade these stocks.
Market makers who choose to continue trading these issues would risk
unlimited liability for the accuracy and truthfulness of financial
information over which they have no control. No legitimate broker or trader
is going to accept that responsibility. Instead, if this rule is
implemented, legitimate market makers will cease to quote OTC Bulletin Board
and Pink Sheet stocks - that means no liquidity for small company stocks, a
loss in price transparency, wider spreads and a major drop in stock prices.
It's the investing public who will be hurt, not those engaged in fraud. In
fact, according to a recent article in Business Week, this rule would play
right into the hands of scam artists who manipulate stock prices, since they
would come to dominate the microcap market once the legitimate traders and
market makers pull out.
Small companies account for a disproportionately large share of our
country's new job creation and technological innovation. Small dynamic
companies depend heavily on market liquidity to maintain their share value
and access to the capital needed to continue growth and expansion. The
proposed amendments to Rule 15c2-11, if implemented, will have a devastating
impact on small companies, their employees and their shareholders. I urge
that the proposed amendments be withdrawn and that this vital sector of the
securities market be preserved.
Sincerely,
OCG Technology, Inc.
Edward C. Levine,
President